Loan defaults on the increase

Australia's leading mortgage insurance companies are reporting higher home default levels following a massive increase in lender mortgage insurance claims. Accounts filed by the two major mortgage insurers with the Australian Securities and Investments Commission (ASIC) showed both were hit by the increase in claims. Mortgage insurance claims are a leading indicator of any changes in credit quality brought about by rising interest rates and falling property prices. “Having had a seven-year period of favourable conditions the decline we're now seeing in home loan affordability has brought our default experience in line with long term trends,” said PMI chief executive Ian Graham. The entry into the Australian market of US based Mortgage Guaranty Insurance Corporation will make it difficult for either of the dominant incumbents PMI and Genworth to increase premium pricing.